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Wednesday, October 24, 2012

Oriental Bank of Commerce has said it is confident of recovering its money from the ailing Kingfisher Airlines even as other lenders have nearly given up hope.

The bank also said that such one off cases will not affect its working.

“We are in the business of banking. Banking is a business of taking risks. If you don’t take risks, what is the intermediation (part a bank plays),” the bank’s Chairman and Managing Director S.L. Bansal told Business Line.

He pointed out that the airline had serviced the interest component of the loan till June so the asset continues to be standard.

The bank had extended a loan of Rs 55 crore to the airline as part of pre-delivery payment finance towards future aircraft deliveries to the manufacturer, Airbus Industrie.

He explained that as the payment (loan) is like a guarantee and is not part of working capital, it was relatively a different kind of advance. “In case the airline does not take delivery of the aircraft, we will get back the amount though it may attract some penalty,” he said. Bansal said there were two or three banks which have similar exposure which should not be treated as advances towards working capital needs of the airline.

He also said that the airline promoter Vijay Mallya had indicated that his company was in talks with a few foreign airlines during his last meeting with the consortium of lenders in Bangalore earlier this month.

His airline has also been given time till the end of this month to come up with a workable revival plan.

Bansal said such cases are part of conducting business. He explained that as professionals, each case is evaluated with care. He said as depositors do not have the capability of taking risks, they do not directly fund an entrepreneur or a business.

“He therefore trusts us to do our job. We are supposed to be professionals. We evaluate the party and take credit decision. In certain cases, casualties are bound to happen, because the economy is not doing well.”

Bansal said the bank will continue to fine-tune its due diligence mechanism but such “ups and downs,” will continue to occur in the industry.